Cash-strapped RI city files for bankruptcy

Cash-strapped RI city of Central Falls files for bankruptcy; Gov calls city finances 'dire'

Associated Press
Europe bailout fund chief visits Beijing
.

View photo

A Chinese paramilitary policeman stands on duty in front of the European Union flag outside the office …

CENTRAL FALLS, R.I. (AP) -- The state-appointed receiver overseeing Rhode Island's cash-strapped Central Falls on Monday filed for bankruptcy on the city's behalf in an effort to solve its fiscal crisis.Receiver Robert G. Flanders described the step as one of last resort after city taxes had been raised and services cut "to the bone," and after municipal retirees and current workers failed to agree on deep -- but voluntary -- cuts to their pensions and benefits."From the ashes of bankruptcy Central Falls will rise again," Flanders said at a news conference at City Hall.Flanders had earlier indicated that seeking Chapter 9 bankruptcy protection in federal court -- a rare step for a municipality -- might be the only option without major concessions from retirees and union groups. Retirees, for instance, were asked to take cuts of up to 50 percent to their pensions and to contribute a sizable amount to their health benefits. Only 12 of 141 retirees agreed to Flanders' proposal before last Thursday's deadline, and of those 12, nine would not have seen their pensions reduced.With the city now seeking bankruptcy protection, Flanders said he plans to reduce pension benefits beginning in late August anyway; the next set of payments will reflect "at least" the cuts he outlined to retirees last month. Those cuts are designed to save about $2.5 million.Flanders also asked the federal court to immediately reject collective bargaining agreements with police and fire department employees. In addition, he said city workers will face layoffs.He described bankruptcy as the only prudent option and said it will allow Central Falls to "reinvent itself as a viable community."Rhode Island Gov. Lincoln Chafee said the move represents a "difficult" decision but that it's needed in light of Central Falls' "dire" financial outlook."We're not going with a Band-Aid approach," Chafee told The Associated Press. "We're going to tackle this, and that's a positive."Central Falls, a 1.3-square-mile city of 19,000 residents about a 15-minute drive north of Providence, has $80 million in unfunded pension and benefits obligations and deficits of $5 million or more projected for each of the next five years. The city has found itself the subject of national headlines over its floundering finances and a high school so troubled that all its teachers were fired in one fell swoop last year, but eventually rehired.Flanders said Monday that the city had irresponsibly entered into unaffordable agreements with retirees. Officials have said it was also hard hit by a loss of state aid and expected revenue from the Wyatt Detention Facility that never materialized. Flanders' predecessor as state-appointed receiver, Mark A. Pfeiffer, also cited a "culture of government" that allowed the fiscal crisis to grow.The mayor, Charles Moreau, and City Council president, William Benson Jr., who were demoted to advisers after the state stepped in last year, have been critical of the receiver. They say it was clear long ago that bankruptcy was the only option."Unfortunately this is the route we've got to go," Moreau said. "At the end of the day, fiscal stability is of the utmost importance."Benson said: "That's what we wanted to do almost a year and a half ago. It can't be any worse than it is. It just can't."U.S. Bankruptcy Judge Frank Bailey of Massachusetts has been named the judge in the case. Flanders said he hopes to have a plan of recovery to present to the judge within 30 days in an effort to prevent a protracted bankruptcy. Ideally, he said, Central Falls would get into and out of bankruptcy in six months.Democratic state Sen. Elizabeth Crowley, who represents Central Falls, called the bankruptcy filing premature, saying Flanders should have given retirees more time to consider the concessions and offer up a counter proposal. Nearly 60 of them had asked for additional time.Once the city's finances stabilize, she said officials should look at ways to make up for lost pension benefits, possibly by negotiating new pensions."These numbers represent Joe and John and Jane and Mary," said Crowley, a life-long resident of city. "These numbers are people, and I'm not going to let anyone forget it."Acting Fire Department Chief John Garvey said negotiations with Flanders had been ongoing and that department employees had agreed to what he called "sizable" cuts."When you're negotiating, you can't give up everything," he said. "Do you want us to apply for food stamps after you make the cuts?"He said the department cannot withstand any layoffs without risking public safety.Municipal bankruptcies are relatively rare, but several jurisdictions have found themselves on the cusp. Jefferson County, Ala., last week postponed a meeting to consider whether to go that route; officials will consider their options Thursday. Harrisburg, Pa., has also been flirting with Chapter 9 in the face of a fiscal crisis.Vallejo, Calif., filed for Chapter 9 in 2008 and is only now ready to emerge from it. Those proceedings have cost millions of dollars.Democratic state Rep. Agostinho Silva has lived in Central Falls for 27 years. He said he worries that no matter what happens in bankruptcy court, someone is going to pay -- literally and figuratively -- for the city's financial problems. Tax increases and service cuts hurt residents, he said. Layoffs or pension cuts hurt city workers and retirees."One way or another someone is going to get hurt," he said. "I just want what's best for the city and to make sure our residents are not overlooked."He said he doesn't want to see Central Falls dissolved or merged into a neighboring community like Pawtucket."I want to make sure the city keeps its identity," he said. "People are very proud of Central Falls. We know we have our problems. But it's our city."Pete Zabek, 59, who has lived in Central Falls his whole life, pointed fingers at the city's elected officials."I think you can blame these mayors who have been on the watch all these years," said Zabek, who was forced to retire from warehouse work in 1986 because of a disability."Somebody's got to do something," he said of bankruptcy. "It's going to take a long time to straighten this mess out."Associated Press Writer David Klepper in Providence contributed to this report.

Rates

View Comments (0)

Recommended for You

  • This is what a monopoly looks like

    On Saturday, I walked into a Comcast customer service center in order to return a Comcast-owned cable modem. Comcast is the only company that offers high-speed internet access at my current address. The problem goes beyond long wait times at the customer service center.

    Vox.com
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

    AdChoicesagoodcooksSponsored
  • 3 Top Dividend Stocks with Huge Yields

    Many investors seek dividends for sure, easy cash in an income portfolio. Matt Frankel: In my opinion, the best dividend stock to buy right now is Prospect Capital Corporation (NASDAQ: PSEC  ) , which yields about 13%. Thanks to an earnings miss, Prospect's share price has pulled back to just over…

    The Motley Fool from RSS
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • How Mercedes-Benz, BMW, and Lexus Powered Ahead of America's Luxury Brands in August

    The Lexus RX, which was the top-selling individual luxury vehicle in August. Lexus led the way in unit sales for the month. The luxury auto market is doing quite well on the coattails of a prospering overall auto market and improving economy.

    Motley Fool
  • Play

    Valuation king says don't buy Alibaba

    Despite a fairly valued IPO, Aswath Damodaran, NYU professor of finance, explains why investors should not buy the hype of Alibaba.

    CNBC Videos
  • Cramer: 'Compelling' stock for slowing economy

    Are you're concerned that the global economy isn't quite as perky as it had been? Cramer is, too. It's these so-called secular growers that Cramer wants individual investors to consider in the days ahead.

    CNBC
  • BP Lawyers Use Old-School Trick; Judge Not Amused

    A legal filing tied to the company's Gulf oil spill case was supposed to have been capped at 35 pages. But lawyers for BP got a little creative with the spacing.

    NPR.org from RSS
  • Tired of Living Paycheck to Paycheck?

    New website reveals how to save $1,000's when you're living paycheck to paycheck. See exactly how.

    AdChoices Media ForceSponsored
  • Lufthansa to order 25 new Airbus planes for $3.24 billion

    Germany's Lufthansa (LHAG.DE) said on Wednesday it had agreed to order 25 new Airbus (AIR.PA) planes worth 2.5 billion euros ($3.24 billion / 1.99 billion pounds) at list prices to replace older aircraft and cut fuel costs at two subsidiary airlines. Lufthansa's supervisory board agreed to buy 10…

    Reuters
  • Return of the $3 Gallon? U.S Gas Prices Are Falling Fast

    Here is the price of gasoline in the U.S. Tom Kloza, chief oil analyst at GasBuddy.com, thinks this year will bring the cheapest autumn gasoline prices since 2010. Gas prices are cheapest in the South and highest in the Northwest.

    BusinessWeek
  • How Boomers Can Play Nice With Millennials At Work

    Here, two boomers — who parent and work with Millennials — offer their take on the generation gap and how boomers can help bridge it: The anecdotes have become stereotypes: Millennials — those graduating from college from roughly 2003 to 2018 — arriving at job interviews in flip-flops, inquiring…

    Forbes
  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • 30 Expert Marketers You Should Follow on LinkedIn and Twitter

    Want to stay up on the latest and greatest marketing tactics? These are the people you should be following.

    Inc Magazine from RSS
  • Crude Oil Prices Skid as Refining Slows

    Total gasoline inventories decreased by 1.6 million barrels last week and remain in the middle of the five-year average range. Total motor gasoline supplied (the EIA’s measure of consumption) averaged 9 million barrels a day for the past four weeks, up by 0.4% compared with the same period a year…

    24/7 Wall St.
  • Best Wrinkle Creams 2014

    Mom reveals simple wrinkle solution that has researchers very excited. Try this free solution today to look and feel years younger.

    AdChoicesBellaLabs.comSponsored
  • Apple iPhone 6 Weekend Sales May Miss, No Worries, Says Bernstein

    Bernstein Research's Toni Sacconaghi today reiterates an Outperform rating on Apple (AAPL) stock, and a $108 price target, warning that Apple may miss high expectations for first-weekend sales of the iPhone 6 and 6 Plus when they go on sale this Friday, but that it may not matter much. Observes…

    Barrons.com
  • Austrian court unfreeze ex-U.S. diplomat's family assets

    Austrian court unfreeze ex-U.S. diplomat's family assetsVIENNA (Reuters) - An Austrian court has unblocked assets owned by the wife of former U.S. diplomat Zalmay Khalilzad, ruling that Vienna prosecutors overstepped their authority by having her bank

    Reuters
  • Here’s What Your Supermarket Will Look Like in 50 Years

    A New York-based food design agency has envisioned what your grocery store will look like in 2065, and you’ll only have to wait a year to find out. Whether it will focus on products resulting from sustainable agricultural practices or forgo packaging all together, two recent projects are showing…

    The Fiscal Times
  • Las Vegas Casinos Thrive at Expense of Macau Amid Probes

    China’s high-spending gamblers are looking to bet outside Macau amid a government assault on corruption and extravagance, and that’s boosting casinos from the Philippines to the Las Vegas Strip. Visitors from China are lifting gambling growth in Las Vegas while casinos in Melbourne and Manila are…

    Bloomberg from RSS
  • What to REALLY look for in Yellen's words

    On Wednesday the Town Crier- Janet Yellen -will take to the podium to announce the latest thinking from the Fed brain trust. What traders and investors should be looking for on Wednesday is any hint or change of language that gives Yellen and her compatriots the ability to interpret the data in a…

    CNBC
  • The New 2015 Sonata®: A Step Above the Competition

    There's a Sonata® that's perfect for you, and this is your chance to build it! Visit the Hyundai® Official Site to customize your 2015 Sonata® today!

    AdChoicesHyundaiSponsored
  • Cheap Oil and Expensive Oil Tankers: This Is Contango

    During the last half of 2008, as the global economy ground to a halt, the price of oil fell from an all-time high of $145 a barrel to less than $40. Thus was born the booming demand for oil tankers, or any other place to stash low-cost crude. The futures markets had entered something traders call…

    BusinessWeek